Forge the link between tech investment and business value
The role that technology plays in helping organizations compete and succeed has never been greater. Cloud, data analytics, artificial intelligence—these are among the key technologies that companies are using to create a strong digital core. As a result, the CIO is now center-stage in helping organizations to transform and reinvent themselves.
But with this new position comes greater pressure—pressure to better understand and improve technology costs, and to more clearly communicate to the CFO, board and the broader C-suite the ultimate business value of technology investments.
CIOs need to maximize and demonstrate the value of each technology investment to the business. Many are already using effective disciplines—such as Technology Business Management, FinOps, and more—in discrete parts of their business. By taking a more cohesive approach, they can create a more holistic, collaborative way to measure and deliver better value from their technology investments, as companies seek to reinvent themselves for competitive advantage.
This is how the CIO can rise to the challenge of helping to shape and lead an enterprise-wide strategy that gives a company’s business, technology and financial teams a shared understanding of how to set, measure and deliver value from technology.
This report outlines how CIOs can collaborate more closely across the C-suite to bring a technology value lens to their operations. And it shows how they can marshal their existing technology finance components and disciplines to respond to five of their most urgent challenges.
Lead an enterprise-wide strategy that gives a company’s business, technology and financial teams a shared understanding of how to set, measure and deliver value from technology.
Right now, CIOs may feel obligated to work solely on immediate concerns rather than devoting time and effort to working with finance and the business to create a shared understanding of how to understand and measure technology investments.
However, this is an opportune moment for CIOs to focus on true value creation for their enterprises. Technology value can give CIOs a crucial advantage, whether they are a technology leader at the top of their game or setting themselves up for success in their first 120 days in office. By industrializing their approach to technology value they can define enterprise value metrics, drive more transparency around technology spending, and then use that transparency to make informed decisions on when and where to reduce, redistribute and expand technology investment.
Based on our experience with companies that are looking for ways to increase transparency in their organization using technology value components, we’ve identified five areas that CIOs should focus on now to drive value for their business in the next six to 24 months.
The technology value approach outlined in the report will help CIOs to cohesively respond to these challenges. They can also choose to tackle these individual initiatives using the selected tactics identified in the report.
Many companies work with product-based operating models: they manage products and platforms to generate ongoing customer value, rather than working on timebound projects.
However, they may be using legacy technology ahead of full migration to AI, data and cloud. This pushes up costs at a time when CIOs need to optimize spending. And while costs have increased, so has the value delivered to the business—yet this added value might not have been clearly communicated to leaders.
To tackle this, companies should revisit operating models using a technology value lens. Go beyond just Agile methods and revisit team structures and roles. Use disciplines such as FinOps, TBM and more to demonstrate the business benefit of every investment in technology. And put in place regular reporting to clearly communicate the business value of your technology investments to the C-suite.
While most leading organizations have embraced cloud, many CIOs struggle to explain their increasing cloud expenditure and the value it delivers. In addition, 86% of companies report increasing the scope of their cloud initiatives over the past two years, yet only 42% say they are fully achieving their expected outcomes.
This is where a structured FinOps program can help. FinOps goes beyond cloud cost management to bring together technology, finance and business consumption and help companies bring greater financial accountability to managing the variable spend model of cloud and get the maximum value from their cloud spend. Working with cloud providers’ tools and technology management tools such as Apptio, FinOps helps teams across the business, technology and finance departments collaborate on data-driven spending decisions.
Software as a service (SaaS) is everywhere in a business. But SaaS inventory models are inefficient and hard to differentiate from third-party spend. They are often bought directly by the business, outside the CIO’s control, which can result in software duplication while increasing tech debt, cost and security vulnerabilities.
Whether you are negotiating new SaaS deals or renewals, avoid the volume lock-in deals that turn variable costs back into long-term fixed costs. Challenge SaaS vendors to justify increases. And build architectures that enable you to switch your SaaS solutions to different suppliers to create competitive tension.
When possible, seek to negotiate “early renewals”, where a company renegotiates a new agreement mid-term. Companies get the most benefit from this when they can demonstrate planned growth with the supplier.
Few CIOs get excited by application rationalization; most view it as an unwanted inheritance of past errors. And paybacks for application rationalization can stretch to more than five years—more than the tenure of the average CIO.
However, this task cannot be ignored. Agile architectures have created thousands of application and data services, many of which may be duplicative or obsolete. Ignoring application rationalization will constrain a company’s business agility and increase its fixed costs.
Code refactoring, or clean-up, is a fundamental part of Agile software development. Apply the same thinking to architecture. Rationalization needs to be a daily task, not a major engagement taken on every few years. CIOs should build the cost of application rationalization into value streams, just as they build refactoring into sprints.
Although many companies have switched to a product-based operating model, corporate funding cycles have not changed. Agile teams might operate on biweekly or monthly sprints, yet they are funded from annual budgets that might only be adjusted quarterly, if at all.
For Agile to work efficiently on its shorter cycles, companies should consider adopting shorter finance cycles that are aligned to the business’s core strategy. This will help with financial transparency on projects and flush out any minor initiatives that might not be delivering value to the business.
In many companies, there may also be capacity to reallocate inefficient legacy innovation funds that are unmoored from the business’s central strategy and priorities.
This is a singular moment for CIOs: they have an opportunity to rise to the challenge of helping to shape and lead an enterprise-wide strategy. With greater collaboration and communication across the C-suite, CIOs can bring a technology value lens to their operations. And they can help a company’s business, technology and finance teams establish a shared understanding of how to set, measure and deliver value from technology. This is the CIO’s moment in the spotlight to demonstrate their business and technology leadership, and unlock true value across their enterprise.